Are you having trouble navigating the IRS maze? Are you confused about which form to use or which number goes on which line? If you do not completely understand the question, you will get the answer wrong. This could be a costly mistake.
The IRS reports that nearly 60 percent of taxpayers use a tax professional to maximize their tax savings. If you are unsure of how something will impact your taxes, it is time to hire a tax professional.
Don’t make the costly mistake of filing your own return if you say yes to any of these questions.
1) Are there mistakes on your previous tax returns?
If there are mistakes on a tax return within the last 3 years, a tax professional can help you file an amended return. If you failed to maximize deductions, this could save you a substantial amount of money.
2) Recently married?
Your marital status on December 31 determines your filing status for the entire year. If you are recently married, a tax professional can advise you on how to adjust your withholding amount, as well as whether it is more advantageous for you to file jointly or separately. A tax professional can help you get your marriage off on the right foot by maximizing your tax savings.
3) Heading for divorce?
The IRS does not automatically take divorce decrees into account. Consult a tax professional to avoid being held accountable for your ex-spouse’s tax liability. A tax professional can also make sure that alimony and child-support payments are recorded properly.
4) Have you lived or worked in multiple states?
Income tax rules differ from state to state. If you move to another state, work in a state other than the one where you reside, or work in multiple states for your job, you need to consult a tax professional. A tax profession can help you allocate your income to maximize your tax savings. Remember to keep good records to avoid allocation issues.
5) Have you started a small business?
Don’t wait until your business grows to consult a tax professional. The initial organization of your business can affect your tax liability in future years. The IRS can be tough on businesses, and there are many rules that govern what taxes you are responsible to pay. Consulting a tax professional during your first year of operation can maximize your savings right away.
6) Have you adopted a child?
The IRS offers substantial tax credit to those who adopt children. This credit is for eligible expenses related to the adoption and is subject to income limits. Consult a tax professional to make sure that you are taking full advantage of this credit, as well as reporting the expenses correctly on your tax return.
7) Have you received an inheritance?
Whether your inheritance is large or small, it is wise to consult a tax professional. The IRS has many estate tax rules: there is original value, cost-basis, value at time of inheritance, capital gains, and many other things to consider. Consult a tax professional so you do not end up over-paying the IRS.
8) Have you suffered the death of a spouse?
Spouses are exempt from estate tax on assets from a deceased spouse. However, it is wise to consult a tax professional to see how this change in status can impact your tax liability in the future.
9) Do you care for elderly parents?
If you are providing more than half of the financial support for an elderly parent, you may be eligible to claim that parent as a dependent or at least claim his or her medical expenses. Consult a tax professional to see if you qualify, and to be sure you are accurately reporting expenses to maximize your tax savings.
10) Do you pay for your grandchild’s college tuition?
Grandparents can pay for college tuition without it effecting their estate tax exemption. However, the tuition must be paid directly to the institution, rather than be given to the grandchild. Consult a tax professional to be sure that you are paying correctly in order to protect yourself penalties.
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Stephen Wallick started Stephen Wallick & Associates to provide tax and accounting services to Contractors, Real Estate Investors, and Realtors. Steve specializes in IRS Tax Resolution services and works with his clients to resolve cases under scrutiny by the IRS. As a tax professional and enrolled agent, Steve can save you money with IRS loopholes each year. With over 20 years going up against “The Man”, Steve is uniquely qualified to resolve even the toughest IRS cases.